Closing Gold & Silver Market Report – 8/12/2013
PHYSICAL DEMAND CAUSES BACKWARDATION; FED ECONOMISTS SPEAK
Gold is causing some uproar as analysts suggest the yellow metal has gone into backwardation, meaning the current spot price is higher than the future contract price. Today, the COMEX division of the New York Mercantile Exchange showed December delivery for Gold rose by $22 to $1,334.20 an ounce, while October’s contract reported $1,334.30 an ounce and the spot price was $6.87 higher. "[This jump in Gold] is the backwardation of the near-buy," RBC Capital Markets Precious Metals strategist George Gero said. "There seems to be demand for the physical." Typically when backwardation occurs, supply begins to see pressure, which can cause a price increase. According to Commerzbank AG, the China Gold Association reported the physical Gold demand for the first half of 2013 is 706.3 tons, nearly topping the 2012 amount of 832.2 tons.
The U.S. Federal Reserve’s future plans are unknown but are keeping everyone on their toes to see what may happen if fiscal policy is tapered or ended. The real question is whether or not quantitative easing (QE) has been effective for the U.S. economy. “Modest boost to economic growth and inflation” is how two Federal Reserve economists described QE2’s performance. "[E]stimates from a macroeconomic model suggest that such interest rate forward guidance probably has greater effects than signals about the amount of assets purchased," the economists wrote in a paper released by the San Francisco Federal Reserve.
At 5:15 p.m. (ET), the APMEX Precious Metals spot prices were:
- Gold, $1,337.80, Up $23.60.
- Silver, $21.46, Up $0.97.
- Platinum, $1,496.60, Down $5.00.
- Palladium, $739.00, Down $3.50.
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